S. Dakota VLT Operators Blame Smoking Ban For 17% To 35% Revenue Drop

PIERRE, SD -- Video lottery operators will ask the state Legislature to modify VLT regulations to help the industry recover from a significant earnings drop this year compared to 2010, said Deb Mortenson, executive director of the Music and Vending Association of South Dakota.

According to MVASD's Aug. 10 survey of operators in Minnehaha County, VLT revenues in that market fell 30% to 35% this year compared to last year. Minnehaha County is home of the state's largest city, Sioux Falls.

South Dakota government figures released in July showed that video lottery receipts were down 10.04% for the fiscal year that ended June 30. But since the smoking ban took effect last November, VLT revenues statewide fell more than 17%, said state budget director Jason Dilges.

Last fall, 65% of voters approved a referendum that applied the ban to bars and restaurants statewide, effective Nov. 11, 2010.

The overlap in timing of the wider smoking ban and the VLT revenue drop is no coincidence, Mortenson suggested. She said Minnehaha operators believe the recently extended ban is chiefly responsible for smaller VLT cashboxes.

The weak national economy and competition from casinos may also be a factor in declining VLT earnings, according to operators.

Meanwhile, casino revenues in South Dakota are up as much as 15% compared to last year, according to local press reports.

Mortenson said another factor cited by operators in the current difficult market for VLTs is the "very small percentage" of money that goes to owners of the machines under current regulations.

Operators will ask the state to modify VLT rules so as to increase public interest in the games, Mortenson said. Presumably that would entail higher bet limits and bigger jackpots.

Vendors are also hoping that new slot-style games, due to arrive on the market in October, will also boost earnings.

The South Dakota Lottery currently licenses approximately 9,200 video lottery terminals. VLTs contribute more than $100 million to South Dakota's annual government funds -- 9% of last year's total. The market launched in 1989.